PHOENIX — A home warranty company accused of defrauding Arizonans for a decade has finally agreed to provide restitution.
Under a deal announced Tuesday, Choice Home Warranty will pay $11.8 million that will provide reimbursement to customers who bought what they thought was comprehensive coverage, only to find out that the appliances were not covered or, even if they were, there were caps on what the company would pay.
How many will get checks remains to be seen, with the Attorney General's Office set to send out information designed to find victims. The agreement covers those who purchased these warranties over a 10-year period ending Jan. 1, 2023.
But Attorney General Kris Mayes noted that more than 1,500 complaints were filed with her office, other state agencies and the Better Business Bureau. And consumers paid Choice Home Warranty anywhere from $420 to $750 a year for services that Mayes said they did not get.
Mayes, in a prepared statement announcing the deal, said behind each complaint is a family
"These families thought they were buying peace of mind,'' she said.
Arizona Attorney General Kris Mayes said more than 1,500 complaints were filed against Choice Home Warranty with her office, other state agencies and the Better Business Bureau.
"They paid for warranties believing they would cover major repairs or replacements when their air conditioning failed in the brutal Arizona heat, or when their water heaters gave out, or when their appliances broke down,'' Mayes said. "But when they needed that coverage most, Choice Home Warranty wasn't there for them.''
The settlement is a bit of an accomplishment itself.
It was Mark Brnovich, Mayes' predecessor as the attorney general, who filed suit in 2019, with a laundry list of complaints. And it took until now for company officials to agree to finance the restitution as well as pay a fine to the state to cover the multi-year litigation.
While Choice Home Warranty did not admit wrongdoing, the company agreed to change its sales practices to ensure that consumers know up front exactly what is — and is not — covered. There's also a provision allowing customers to cancel within 30 days without penalty.
It even provides a script of what salespeople must tell prospective customers in phone calls. And it actually allows investigators from the Attorney General's Office to pose as customers and interact with the sales representatives without first providing notice.
The original 2019 lawsuit had a laundry list of what Brnovich said at the time were obvious cases of fraud.
For example, the "basic'' service contract excluded refrigerators and air conditioners from coverage even though its own website prominently features pictures of appliances, including a refrigerator.
There was a more expensive "total'' plan, targeting Arizonans.
One claim told would-be customers that a broken air conditioner "will leave your family in an extremely uncomfortable situation, so it's best to have a plan in place for fast repairs if something goes wrong.'' Another was aimed at people who have refrigerators or freezers in the garage or other parts of the house without air conditioning.
But the lawsuit pointed out that the warranty — even the "total'' plan — did not cover refrigerators not located in the kitchen.
As to air conditioners, the legal claim said the company wouldn't cover water leaks, condenser casings. condensate pumps, drain line stoppages and other issues.
That, however, was just part of the problem. It turns out that the plan had a $1,500 cap on any repair or replacement.
"Few, if any, air conditioners can be replaced for $1,500, and the average air conditioner costs thousands of dollars,'' the lawsuit said. "Nevertheless, Choice Home Warranty continued to promise Arizonans in its advertising that if an air conditioner stopped functioning, consumers would pay 'only the service fee' to get the air conditioner repaired or replaced.''
Even when the company would respond to complaints to its "24/7 hotline,'' the lawsuit said the company gave itself up to 96 hours before it was required to even contact a technician. Then it took several more days to determine if a claim was covered.
"Meanwhile, Arizona residents were stranded in dangerously hot homes,'' the lawsuit stated, with examples of customers waiting in 100-plus degree heat for the work to be done — or to the extent that $1,500 would cover it.
Mayes said that customers who thought they had coverage found they hadn't been told about critical exclusions and limitations.
"In some cases, these representatives had outright lied about what the warranties would cover,'' she said. "Families discovered too late that the fine print took away much of what the sales pitch had promised.''
Mayes also pointed out that Choice Home Warranty, based in New Jersey, has settled a consumer fraud suit in 2015 with that state's attorney general, paying out $780,000.
"Yet they continued these unlawful practices, expanding their operations and victimizing even more consumers across the country, including here in Arizona,'' she said.
